In the mid-1930s, Monica Toth’s father fled from Germany to South America to escape rising, violent antisemitism. Monica was born there in 1940 and emigrated to the United States in her twenties. Back in South America, her father became a successful businessman, and, before his death, he gifted Monica a considerable amount of money, which was kept in a foreign bank account. Like many who fled Germany or later survived the Holocaust, he felt strongly that his daughter should have a reserve of money in case (as happened to him) she might one day have to flee government persecution.
Years later, Monica learned about the federal government’s Foreign Bank and Financial Accounts (FBAR) reporting requirement. Under the 1970 Bank Secrecy Act, Americans with foreign bank accounts containing more than $10,000 are required to file an FBAR form with the federal government. In 2010, Monica filed five years’ worth of reports. Following an audit, she ended up being assessed a relatively modest amount of back taxes and penalties, which she paid promptly and in full.
But the government wasn’t done with her. The IRS later decided that a reasonable person in Monica’s shoes would have tried to figure out whether the FBAR requirements applied. That made Monica’s reporting violation “reckless,” which meant it could be categorized as “willful,” which exposed her to a maximum civil penalty of more than $2 million. At first representing herself without attorneys, Monica raised the Eighth Amendment’s Excessive Fines Clause as a defense. But first the district court and then the 1st U.S. Circuit Court of Appeals rejected that defense on a startling ground. According to the First Circuit, the multimillion-dollar penalty “is not a ‘fine’” and “the Excessive Fines Clause of the Eighth Amendment does not apply to it.” The court declined even to consider whether the penalty might be excessive.
Federal Government Seeks to Impose Multimillion Dollar Excessive Fine on Grandmother, Claiming a Fine is a “Civil Penalty.”
An Boston-area grandmother is fighting to have courts consider whether the multimillion-dollar penalty the government imposed on is unconstitutionally excessive.